Minor Thoughts from me to you

Earlier today, the American Academy of Physician Assistants issued an urgent Action Alert:

In a speech before the American Medical Association today, President Obama once again restated his commitment to building America's primary care workforce of "physicians and nurse practitioners" - omitting PAs from the discussion.

Please contact President Obama today. Let him know that PAs are listening- and that we are gravely concerned that we're not hearing a similar commitment to physician assistants.

PAs are the future of health care, and must make their voices heard. Contact the President today with a special message: PAs are a Critical Part of Health Care Reform.

I knew about it because a friend -- who's studying to become a PA -- emailed me and asked me to contact President Obama. She asked me to emphasize how important it was that PA's be part of the solution. Here was my response.

I can't do that. I disagree with the entire premise of healthcare "reform". The AAPA and Congress are both operating on a flawed assumption: the idea that it's even possible to create a plan that works for all Americans. It's not.

No one person, or group of people -- no matter how smart -- has the ability to create a health plan that meets the needs of 300 million unique individuals. No one group has enough information to make good decisions for everyone. Every patient has different needs, different backgrounds, different abilities, different family structure, different reactions, and different prejudices. I know you've seen this in your experiences in healthcare.

Through family, through friends, through my wife and through my job, I've heard a lot of stories about healthcare. One thing I've learned is that doctors (and PA's) have trouble coming up with a treatment plan that works for one patient. Often, the patient and the doctor have to work together over a period of time to figure out what works best for the specific condition and patient. How much harder -- how much more impossible -- is it to define a plan that works for everyone?

The necessary knowledge doesn't exist in one database, one field, one speciality. It's dispersed through many different people, each holding incomplete and sometimes seemingly contradictory information. I'm not just talking about medical information either. Each patient has a different willingness to undergo treatments, a different tolerance for discomfort, and a different preference for how long to continue treatment. How can one committee, how can one plan, possibly work for all people?

The answer is not to centralize decision making in Washington, D.C. or even in Madison, WI and Albany, NY. The answer is to give each patient, each doctor, each PA, the full freedom they need to reach the decisions that work best in the individual circumstances.

In the end, it's the patient that must be free to make all of the required decisions. Doctors, nurses, PAs, and healthcare organizations ultimately listen to whoever is paying the bills. Right now, that's Medicare, Medicaid, and the insurance companies. As a result, healthcare professionals are far more responsive to the desires of big government and big insurance -- not to patients. The solution is to return control to the patients -- not to take it further away from them.

Here's an interesting statistic (page 417): in 1960, 55 cents of every dollar of health care was out-of-pocket. In 2003, it was down to 16 cents. Today, the rest is paid through taxes and insurance premiums. And all of that insurance hasn't saved anybody any money. Healthcare costs today are 80% higher than they were in 1960. Put a different way, patients are only paying 16% of the costs out of pocket but the total costs have skyrocketed. That hasn't exactly turned out to be a great deal.

I feel very strongly that we'd be much better off if we started paying for healthcare the same way we did in the 1960s. If patients pay more out of pocket at the place of service, they'll ultimately get higher quality care. Overall costs will drop (through increased price transparency and competition) and patients will save money in the end.

And, yes, there will always be people who's injuries and illnesses exceed their financial resources. But they would be better served through block grants than through government plans, payments, and rationing. If they need financial assistance, give them extra finances. But allow them to control how, when, and where they're treated.

That's healthcare reform that will truly change things. Trying to create a nationwide plan by getting all of the special interests involved will just result in more of the same failed healthcare policies that we've seen over the last 20 years.

Health Reform's Savings Myth, by Arnold Kling:

Anyway, what I was looking for on the web was a link to this article, which says that modern doctors are too beholden to insurance companies, rather than to patients. Nowhere does the the author mention that in 1960 fifty percent of personal health care expenditures were paid for by patients themselves, whereas now it is only ten percent. Instead, he writes as if modern doctors are greedier than they used to be.

Doctors have bills to pay into. But most patients expect their doctor to ignore the person paying the bill and listen to the person demanding that they (the doctor) do something that might reduce the payment. And then the patient gets angry when the doctor does no such thing.

That's why my health insurance reform plan would involve shifting healthcare spending from large premiums and all-inclusive health "insurance" plans to small premiums and plans that only offer catastrophic insurance coverage. Patients would have more money left in their pocket, to allow them to pay more money out of pocket.

Do that and you'll discover that doctors are suddenly more responsive to patient needs and desires.

Ken Bavier recently wrote about Michigan's new plan to retrain unemployed workers as nurses. He's not thrilled with the idea.

I wrote a response to his thoughts.

I'll respond as someone who works in health care IT, but not in the actual delivery of health care. I'd consider myself an educated observer of health care but not really a participant in the health care field. (And my HIT experience is on the billing side, not the clinical side.)

I'll post my economic thoughts since I don't really have any clinical thoughts. I think a lack of true financial incentives are strangling the field. I don't see any viable alternative explanation. You mention several causative factors: underpaid teachers (leading to a lack of teachers), lack of money to expand nursing training, nurses who don't have the influence to change their work environment, and a lack of nurse / physician collaboration. Those are all economic factors that show up when incentives aren't aligned properly.

In her recent State of the State speech, Governor Granholm talked about a waiting list of people who want to become nurses and a shortfall of actual nurses. That's really an amazing statement. Organizations are desperate for nurses. People are eager to become nurses. But nothing's happening. Where's the dam in the river? Why isn't the water flowing downhill here? Why are teachers underpaid even when there's a desperate need for training? Why is there a lack of money to expand training for the very workers that are desperately needed?

The only rational explanation I can see is that health care organizations either don't believe they'll profit from increasing nursing staff or don't believe their allowed to take the actions necessary to properly increase their nursing staff.

Most of the businesses that we're familiar with hire friendly, competent, well trained staff for a very good reason: a customer that feels insulted is likely to leave for a business that makes them feel welcome. Good employees are an asset to these businesses. They serve both to increase customer trafic and to retain customer traffic. This increases profitability. Good employees are good for the bottom line. Bad employees drive customers away and keep customers away. This decreases profitability. Bad employees are bad for the bottom line.

But I don't think this is true in health care. In the U.S., people have a choice of 1-3 health plans offered by their employer. These health plans provide a very limited number of options for outpatient and inpatient clinical care. (Warning: this part is from the patient perspective. It may or may not match reality as seen from the provider's perspective. And, that's kinda the point.) Do you feel insulted by your doctor? You can request another one -- if he has openings. But he's employed by the same organization that hired th first jerk. Do you feel that your nurse is slacking off? Good luck getting another one. Want to move to a different clinic or hospital? Well, you can, if you want to pay for it entirely out of your own pocket.

Patients have very limited choices. This leads to limited (non-existent?) competition and limited incentives for improvements. Sure, health plans compete for members. But they're mostly interested in getting access to premium paying healthy people. Nobody's really competing for patients to walk into their waiting rooms. Few organizations are truly competing to have the best physicians and nurses. Few organizations truly believe that the quality, friendliness, and diligence of their providers drives their bottom line profits.

So much for my view of the profit side of the problem. What about the regulatory side? Here I'll just have to throw out questions. What qualifications are necessary to open a nursing school? What qualifications are necessary to teach nursing? What prerequisites are necessary to enter nursing school? What would prohibit (or discourage) a health care organization from providing training? What would prohibit (or discourage) other organizations from providing training? What existing regulations make it difficult for graduates to find jobs? What existing regulations make it difficult for graduates to learn on the job in a controlled, manageable way? What types of jobs do nurses do that could be done by someone less credentialed and less well trained? How many of those lower skill positions are limited to nurses even when a nurse's qualifications aren't necessary to do the job well?

I don't know nursing well enough to answer those questions myself. But I've read enough about the health care field to believe that those questions have answers and that those answers would reveal a lot about the current nursing shortage. I think the only way that the shortage will truly be alleviated is if organizations clearly profit from better nursing and are free to act in a way that will maximize their profits.

There, Ken. I think I've written something that may anger people just as much as your original post.

Originally posted as a comment by jmartindf on Nod If You Can Hear Me using Disqus.

There Ain't No Such Thing as Market-Based Universal Coverage (Cato @ Liberty)

Over at The Corner, Harvard Business School professor and Manhattan Institute scholar Regina Herzlinger urges conservatives to support universal coverage -- but in a market-oriented way. That is an absurdity. Once the government adopts a policy of universal health insurance coverage, a free market is impossible and the casualties begin to mount.

The Medicare Advantage program gives seniors a choice. Instead of participating in the traditional Medicare program, they can "spend" their Medicare dollars on a health plan from a private insurer. President-elect Obama thinks we should eliminate that choice.

We've got to eliminate programs that don't work, and I'll give you an example in the health care area. We are spending a lot of money subsidizing the insurance companies around something called Medicare Advantage, a program that gives them subsidies to accept Medicare recipients but doesn't necessarily make people on Medicare healthier.

And if we eliminate that and other programs, we can potentially save $200 billion out of the health care system that we're currently spending, and take that money and use it in ways that are actually going to make people healthier and improve quality. So what our challenge is going to be is identifying what works and putting more money into that, eliminating things that don't work, and making things that we have more efficient.

His statement is a blatant misrepresentation of Medicare Advantage. The money isn't a subsidy, it's a payment. The government gives the health plan a fixed amount of money and in return the health plan cares for the senior. If the senior's health care costs less than the payment, the health plan makes money. If not, the health plan loses money. It's a great incentive for the health plans to find cost-effective ways to treat people.

Eliminating that incentive won't "make people healthier and improve quality". It will probably bloat costs -- traditional Medicare pays doctors for each service performed, regardless of need or outcome.

No, this isn't about saving money or increasing quality. This is about kicking my grandmother off of her much-loved Kaiser Permanente plan and forcing her back into the arms of government bureaucrats. It's about increasing the government's control over us and eliminating our health care choices.

I've said before that McCain's healthcare plan is one of the few proposals he's made that I actually like. Robert Carroll explained some of the benefits in the Wall Street Journal.

The McCain health-care insurance tax credit may well be one of the most misunderstood proposals of this presidential election. Barack Obama has been ruthless in his attacks. But the tax credit is highly progressive and will provide a powerful incentive for people to purchase health insurance. These features under normal circumstances should endear Democrats to the proposal.

There has been a lot of rhetoric and misstatements, but what exactly does Sen. McCain have in mind? He would replace the current income tax exclusion for employer-sponsored health insurance with a refundable tax credit -- $5,000 for those who purchase family coverage and $2,500 for individual coverage. Mr. McCain would also reform insurance markets to stem the growth in health insurance premiums.

What many may not realize is that the federal government already "spends" roughly $300 billion to $400 billion through the tax code to encourage people to pay for their health care through employer-sponsored health insurance. This subsidy takes the form of the exclusion for employer-sponsored health insurance from both income and payroll taxes.

Consider the current exclusion. Its value rises with how much someone spends on health care, and how much of this spending is funneled through employer-sponsored health-care coverage. This creates an incentive for people to purchase policies with low deductibles, or which cover routine spending. These policies look a lot less like insurance and more like prefunded spending accounts purchased through employers and managed by insurance companies. Consider homeowners and auto insurance policies. Do these cover routine spending on cleaning the gutters or tuning up a car?

The subsidy encourages people to buy bigger policies that cover more, and leads to greater health-care spending. Moreover, lower deductibles and coverage of routine spending dulls consumers' sensitivity to price. Reducing the tax bias should result in insurance that is more focused on catastrophic coverage and less on routine spending.

By replacing the income tax exclusion with a fixed, refundable credit, the McCain proposal reduces the tax bias for large insurance policies. Because the credit is for a fixed amount, regardless of how much you spend on health care, it helps break the link between the existing tax subsidy and how much is spent on health care. This improves incentives in the health-care market by reducing the bias that has contributed to such a high level of health-care spending.

Moreover, the credit provides a powerful incentive for people to purchase insurance. The two tax provisions -- the new credit and the repeal of the income tax exclusion -- on net provide a substantial tax cut of $1.4 trillion over 10 years. Not only do most Americans receive a tax cut under the McCain proposal, but the tax cut is directed toward low and moderate income taxpayers.

What is striking about this picture -- and contradicts Mr. Obama's public comments -- is that the McCain tax credit for the purchase of health insurance exceeds the value of the current exclusion for all income levels shown. Indeed, it generally provides more resources to purchase health insurance than the existing exclusion. The total subsidy for health care would rise from about $3.6 trillion over 10 years today to roughly $5 trillion under his proposal.

Will the insurance that is purchased be a generous plan with first dollar coverage or low deductibles? It is much more likely to be a plan with higher deductibles that is more focused on providing true insurance against catastrophic losses rather than a more generous plan that includes a lot of prepayment for routine and predictable medical expenses. But this is precisely one of the objectives of the policy: to reduce the current tax bias that encourages people to funnel routine health expenses through insurance policies.

The elimination of the income-tax exclusion should reduce private health-care spending; to the extent this reduces the cost of health care, it should also put downward pressure on the growth of Medicare and Medicaid costs. Thus, by removing the tax bias for more generous health coverage, the McCain health credit also has the potential to provide important dividends to the entitlement problem down the road.

To be clear, I'm not wild about the subsidy that McCain's plan excludes. But I love the way it changes the current health insurance incentives. It not only gives people the motiviation to spend less on healthcare -- it also gives them the means to do so.

Too bad it has no chance of being passed into law. Even if McCain wins the presidency, the Democrat House and Senate would never pass this plan.

Robert Hanson suggests that we cut our healthcare spending by up to 50%. Why?

Am I being too allegorical? Then let me speak plainly: our main problem in health policy is a huge overemphasis on medicine. The U.S. spends one sixth of national income on medicine, more than on all manufacturing. But health policy experts know that we see at best only weak aggregate relations between health and medicine, in contrast to apparently strong aggregate relations between health and many other factors, such as exercise, diet, sleep, smoking, pollution, climate, and social status. Cutting half of medical spending would seem to cost little in health, and yet would free up vast resources for other health and utility gains. To their shame, health experts have not said this loudly and clearly enough.

So I want to say loudly and clearly what has yet to be said loudly and clearly enough: In the aggregate, variations in medical spending usually show no statistically significant medical effect on health. (At least they do not in studies with enough good controls.) It has long been nearly a consensus among those who have reviewed the relevant studies that differences in aggregate medical spending show little relation to differences in health, compared to other factors like exercise or diet. I not only want to make this point clearly; I want to dare other health policy experts to either publicly agree or disagree with this claim and its apparent policy implications.

How much could we cut? For the U.S. it seems reasonable to project the 30% cut in the RAND results to a 50% cut, since the U.S. spends so much more than other nations without obvious extra health gains. I thus claim: we could cut U.S. medical spending in half without substantial net health costs. This would give us the equivalent of an 8% pay raise.

As Hanson notes, his recommendations are not likely to be implemented soon -- or at all. So how can you benefit yourself?

Do you have little voice in health policy or research? Then at least you can change your own medical behavior: if you would not pay for medicine out of your own pocket, then don't bother to go when others offer to pay; the RAND experiment strongly suggests that on average such medicine is as likely to hurt as to help.

If this intrigues you, if you find yourself saying "It can't be true", then do go read the full essay. I just pulled four paragraphs out of a much, much longer argument.

He really does believe that more medicine is as likely to hurt you as it is to help you. Doctors make mistakes, just like everyone else. The best way to reduce your risk of mistakes is to reduce your exposure to hospitals, clinics, and medical professionals. QED.

Greg Mankiw hosted a brief back-and-forth about the State Children's Health Insurance Program and how it will be renewed. First, the President's position.

1. We think the "C" in SCHIP stands for "children". Over the past several years, adults have been added to SCHIP. Some were parents of kids with health insurance, others were adults without children. We were responsible for some of those additions, as we approved State waiver requests. We made a policy shift this year, based in part on further input from the Congress, and we're now returning SCHIP to its original purpose. Over the next few years, our policy will return SCHIP to a kids-only program. States that are now covering adults will have to move them onto Medicaid or a State program. While the advocates for HR 976 argue they share this goal, the bill doesn't match the rhetoric - it lets adults in some states back into SCHIP. And in six States (IL, NJ, MI, RI, NM, and MN), more than half of their projected SCHIP expenditures this year are for adults. We think this is the wrong direction for a program that should be about children.

2. We think SCHIP should be about helping poor kids. This bill also raises taxes to subsidize health insurance for some middle-income kids. New York wants to use Federal dollars to cover kids who are clearly not poor: for a family of four, they would like to use Federal tax dollars to pay 65% of health insurance costs for a family of four with income as high as $82,600. (We measure this in terms of a multiple of the "poverty line" - NY wants to cover kids up to "400% of poverty".)

Next up, the Democrats position.

(1) The President supports a proposal that would reduce annual spending on SCHIP relative to inflation and reduce the number of covered children and pregnant women by 840,000 according to the Congressional Budget Office (CBO).

You might ask how the $5 billion increase in spending over 5 years promised by the White House could result in more uninsured. The answer is that for technical reasons the CBO baseline assumes $5 billion in nominal dollars annually going forward, something depicted in the flat green line in your previous post. But spending at this baseline would fall relative to general price inflation and plummet relative to health spending growth. As a result, under CBO's baseline the number of people covered would fall from 7.4 million in 2006 to 3.5 million in 2017, despite an increase in the eligible population.

He says that like it's a bad thing. Unless you assume that the government should be the great health fairy in the sky guaranteeing a doctor in every pot and a nurse in every garage. Or something like that.

To be fair, the response does end this way:

You believe in a smaller government. But in this case there's no free lunch. The White House veto will deliver a smaller government but at the cost of a reduction in the number of currently eligible low-income children covered by SCHIP and an increase in the number of uninsured. You might have better ideas about to reduce the number of uninsured children. But I have a hard time seeing how a Presidential veto could be one of them.

I do have ideas. (One day I'll even write about them.) But part of reforming a system involves avoiding the urge to break it even more than it's already broken. I fear the new SCHIP bill would make it much harder to scale back government involvement later. And that's how a Presidential veto of a bad idea could be one of the ways to reduce the number of uninsured children.

Anyway, if you haven't understanding the back and forth blather (or just haven't cared), this is a good overview of both positions.

State Children's Health Insurance Program. It's a program created by Congress to provide health insurance for children whose parents are too poor for private insurance, but too rich for Medicaid. It's set to expire at the end of this month and Congress is fighting with President Bush over the terms of its renewal.

The House wants to double funding from $5 billion a year to $10 billion a year and cover about 3.4 million more children. The President wants to increase funding by only 20%, to $6 billion a year, and only cover children whose parents earn less than $34,340 -- twice the poverty line.

Bloomberg reported a heartwarming story from New Jersey about a family that uses SCHIP to pay for private school and basic cable.

If SCHIP weren't available, Carlie's parents could cover only the teenager through a $230-a-month policy with Horizon Blue Cross Blue Shield of New Jersey, according to the Web site ehealthinsurance.com.

What are the Siravo's spending their money on instead?

There's also $352 a month on a home-equity loan the Siravos took out to send Carlie to a private Catholic high school. Tuition is $9,000 a year.

The family's monthly bills consume most of their take-home income. Pulling out her checkbook, Lori said there's the mortgage ($1,500), utilities ($743), phones and Internet service ($200), car insurance and gasoline ($205), property taxes ($230), basic cable television ($48), food ($600) and credit- card payments ($325) on an outstanding $11,000 balance. That's $46,212 a year, not including clothes, school books and extra- curricular activities for Carlie.

New Jersery better be expensive. Between Vonage, DSL, and a two-line family plan, we only pay a little over $100 for phones and Internet service. We also don't spend anywhere near $600 a month for groceries. I'll grant that our daughter is only 7 months and Carlie is 16, but I'd be shocked if our grocery spending really quadruples over the next 15 years.

The Siravo's have every right to spend their money as they wish. But they don't have every right to take tax-payer subsidies for healthcare, then turn around and spend their savings on luxury goods. Private school, cable, and gourmet food? Give me a break.

Should nursing mothers get longer breaks on tests?

One test stands between Sophie Currier and her Harvard medical degree and a prestigious residency.

But Ms. Currier says she runs a high risk of failing the test unless the National Board of Medical Examiners gives her additional break time to pump breast milk for her 4-month-old daughter.

The board has refused the request, and on Thursday, Ms. Currier asked a Massachusetts Superior Court judge to order it to give her extra time on each of two days of testing, plus a private room with a power outlet so she can express her milk in private with an electric pump. (The nine-hour exam, on clinical knowledge, allows 45 minutes for breaks.)

I don't know what's fair in this situation. Students have a strict time limit to take the test and consider their answers. Giving this mother extra time might give her an edge through extra time to consider answers or relax. Then again, is it fair to give up all chance of a career because of a welcome but ill-timed pregnancy. So, I don't know what the answer is.

I do know this. The National Board of Medical Examiners is the only organization that can license students to practice as doctors. The NBME has a state monopoly on licensing and accreditation. As long as they have this monopoly, no other licensing organization can offer tests with different rules or opportunities. Students are limited to the options offered by one, inflexible organization. Is this any way to run a healthcare system?

I'd like to see multiple, competing accreditation organizations. Students would be able to choose who to take test from. Employers would be able to choose who to accept licenses from. If one organization proved to be unfair or inflexible, both students and employers would have a choice to use someone else's services.

Wouldn't that be the more American way to run healthcare?

While in Massachusets, Mitt Rimney created the "RomneyCare" mandated health plan. Now that he's running for President, he's getting ready to push for a free market solution.

Romney to Pitch a State-by-State Health Insurance Plan - New York Times

It relies on federal incentives for market reforms, tax deductions and other changes to encourage people to buy health insurance and drive down costs.

There is no individual mandate in Mr. Romney's plan for the rest of the country. Instead, it concentrates on a "federalist" approach, premised on the belief that it is impossible to create a uniform system for the entire country. Along these lines, the federal government would offer incentives to states to take their own necessary steps to bring down the cost of health insurance.

According to a preview of the presentation provided by Mr. Romney's policy advisers yesterday, Mr. Romney will highlight how the nearly 45 million uninsured in the country can be divided into roughly three groups: about a third are eligible for public programs but are not enrolled; a third are low income but ineligible for public programs and need some help from the government to purchase health insurance; a third are middle income but have chosen not to buy health insurance.

In his plan, Mr. Romney proposes taking federal money currently being used to help states cover the cost of medical care for the uninsured and offering that money to states to help low-income people who are not eligible for Medicaid and other public programs to buy their own private health insurance.

The same pool of money will be wielded as a carrot for states to reform their health insurance regulations to help drive costs down and make plans affordable. That would include reducing the number of requirements for coverage that states impose on health insurance providers or lifting restrictions in some states on health maintenance organizations.

Mr. Romney, who helped found a hugely successful private equity firm, argues that the existing tax system penalizes those who do not acquire their health insurance through their employer, and that has prevented the development of a vigorous, affordable health insurance market. Those who acquire health insurance from their employers pay for their premiums with pre-tax dollars, but those who do not must use post-tax dollars to buy it. So Mr. Romney wants to allow people who buy their own health insurance to be able to deduct premiums, deductibles and co-payments from their income.

Eventually, Ms. Canfield said, the goal would be for people to be able to opt out of employer plans if they do not like them and go out on the individual market to buy health insurance on their own.

These all sound like really good ideas from the bare bones descriptions. It's a shame that Governor Romney didn't push for a plan like this while he was in Massachusets. It's possible that he didn't do so because the Massachusets legislature never would have gone along with it. On the other hand, his actions as governor leave me unsure of how President Romney would react to a stubborn Democratic Congress.

How is this not illegal? Select Hospitals Reap a Windfall Under Child Bill - New York Times

Despite promises by Congress to end the secrecy of earmarks and other pet projects, the House of Representatives has quietly funneled hundreds of millions of dollars to specific hospitals and health care providers under a bill passed this month to help low-income children.

... One hospital, Bay Area Medical Center, sits on Green Bay, straddling the border between Wisconsin and the Upper Peninsula of Michigan, more than 200 miles north of Chicago. The bill would increase Medicare payments to the hospital by instructing federal officials to assume that it was in Chicago, where Medicare rates are set to cover substantially higher wages for hospital workers.

The bill, for example, would give special treatment to two hospitals in Kingston, N.Y., stipulating that Medicare should pay them as if they were in New York City, 80 miles away. Representative Maurice D. Hinchey, Democrat of New York, who worked to get this provision into the bill, said it would allow the hospitals to pay competitive wages so they could keep top health care professionals.

John E. Finch Jr., a vice president of Benedictine Hospital, one of the two in Kingston, said the bill would "make a significant difference to us financially," increasing the payment for a typical Medicare case by $1,000.

Republicans sometimes did the same thing when they controlled Congress. Under a 1999 law, for example, a small hospital in rural Dixon, Ill., was deemed to be in the Chicago area "” 95 miles away "” at the behest of its congressman, J. Dennis Hastert, who was then speaker.

This is outright fraud. No matter how hard hospital administrators pretend different, these hospitals are not in New York City or Chicago. The hospitals will be taking money that the law says they're not entitled to. That's wrong. Any doctor trying to defraud Medicare out of that much money would be stripped of his license, find, and probably jailed. Why should these Congress men and women be treated any differently?

One of life's primary lessons is that you shouldn't just think about the immediate effects of a decision or policy, but the long-term secondary consequences as well. Here are a few examples.

Be careful about trying to soak the rich through taxes. It may backfire. Asymmetrical Information: Loser..er...Labor Pays

Recent research has cast an eye in a somewhat different direction, showing that the tax may be borne not entirely (or even principally) by owners of capital, but by workers. ... A recent paper by Kevin Hassett and Aparna Mathur of the American Enterprise Institute analyzes data across countries and over time, concluding that for countries that are part of the Organization for Economic Cooperation and Development (OECD), a 1% increase in corporate tax rates results in a 0.8% decrease in manufacturing wage rates. (Economic intuition suggests significant negative effects of the corporate tax on manufacturing wages because of the complementarity of capital and labor for skilled workers.)

Wage effects of this size suggest labor bears much of the burden of the corporate tax. In fact, workers collectively would be better off if they voted for higher taxes on labor with corresponding cuts in the corporate tax.

That's for tax policy. How about trying to reduce state healthcare costs by requiring state employees to pay a larger portion of their own healthcare costs? Agency: GOP benefit cuts problematic

A plan by Assembly Republicans to require most state employees to pay 10 percent of their health insurance premiums could actually end up costing taxpayers more money, the state Department of Employment Trust Funds warns.

Stella warned that by requiring workers to pay a flat 10 percent premium, it would undercut the state's three-tiered premium system. Under the current system, employees who enroll in more cost-effective plans pay a lower percentage of the premium than those in higher-cost plans.

"We believe the 10 percent mandate will end the tiering structure and will eliminate our ability to effectively control cost increases," Stella wrote. "In fact, if we are correct premium costs for the state will increase rapidly and, if significant enough, render any savings from this proposal illusory."

Finally, how about changing the way doctors are compensated? Doctors - Wages and Salaries - New York Times

In the United States, nearly all doctors are paid piecemeal, for each test or procedure they perform, rather than a flat salary. As a result, physicians have financial incentives to perform procedures that further drive up overall health care spending.

Doctors are also paid whether the procedures they perform go well or badly, Dr. Bach said, and whether they are crucial to a patient's health or not..

"Almost all expenditures pass through the pen of a doctor," he said. So a doctor may decide to perform a test that costs a total of $4,000 in order to make $800 for himself -- when a cheaper test might work equally well. "This is a highly inefficient way to pay doctors," Dr. Bach said.

This article doesn't list any unexpected consequences of changing the way doctors are paid, but I can take a few guesses. Doctors might start to work fewer hours if they're salaried instead of being paid by the procedure. If doctors are paid based on performance rather than procedure, they may start to avoid sicker patients in favor of healthy, easy to treat patients. It's not a guarantee, of course, but is a possibility.

When considering any policy changes, it's best to at least think through the possible secondary effects of the change.

Massachusetts Universal Care Plan Faces Hurdles - New York Times.

People who must pay the full cost themselves, who are crucial to the success of the nation's most ambitious effort to achieve near-universal coverage, may now be a majority of the state's uninsured and not all are rushing to get coverage. Many of them are healthy young people in their 20's and 30's, state officials say.

Businesses are also less than thrilled about the universal mandate.

"This is going to bring me to my knees," said Deb Maguire, who runs Liam Maguire's Irish Pub and Restaurant in Falmouth.

Ms. Maguire said she had offered health insurance, costing employees $42 a week and her $45, but only about 10 of 30 employees purchased it. Now the others will enroll, she said, an expense significant for them and "just astronomical for me."

Asymmetrical Information: Okay, so what's the plan? Meanwhile, Jane Galt / Megan McArdle wants to know where the savings will come from in a world with universal healthcare

Winds of Change.NET: It's all about me, so praise me, why doncha? Donald Sensing reports on the downside of building self-esteem -- employees who crumble under criticism.

Evidence For Global Warming Evaporating? Ed Morrissey looks at Al Gore's evidence for global warming and reveals that it's thin indeed.

The California Legislature thinks you're too dumb to own an ultrasound machine. Here's why:

"I've seen the images, and they are amazing," Mr. Lieu, referring to ultrasound pictures, said in a telephone interview after the Assembly vote. "I could watch for hours. That's the problem. Someone could leave it on the belly all day long and do harm without even knowing it."

Some studies have shown that when used improperly, the ultrasound machine can heat internal organs and the fluid inside a womb, possibly causing neurological damage to a fetus, Mr. Lieu said.

Is Mr. Lieu afraid that he's a moron or that the voters are morons? I trust that the American populace is smart enough to use ultrasound machines responsibly. Mr. Lieu just thinks you're an idiot who will strap one on and leave it running for the next 8 hours.

Fortunately, one California legislator actually uses his brain:

"We can't legislate everything, and this is certainly one of those things that we're going down the path of just really binding our society with a billion little laws," said Assemblyman Dave Cogdill, a Republican from the Central Valley.

Would that the rest of the legislators took a hint. Wouldn't it be simpler to just outlaw everything and force voters to ask for permission before doing anything? It sure looks like that's the road we're headed down.

From today's Wisconsin State Journal (Federal health insurance bill draws wide opposition):

Senate Bill 1955 would let small businesses and trade associations band together and offer group health coverage on a national or regional basis. No law precludes them from doing that now, but a patchwork of state insurance mandates makes it cost-prohibitive and logistically impractical, said Craig Orfield, spokesman for Sen. Mike Enzi, R-Wyo., the bill's lead sponsor.

Currently, each state decides which benefits insurance companies must offer. In Wisconsin, the mandates include mammograms, alcoholism treatment, child wellness services and chiropractic care.

Some people are opposed to the bill:

The cancerous tumor in Nancy Restivo's breast was no bigger than a grain of salt when a routine mammogram discovered it in 1994. She credits the mammogram - paid for by her insurance company - with saving her life.

"I'd want that kind of coverage for as many people as possible," said Restivo, 59, a retired Janesville teacher.

I have a question for Ms Restivo. Your health insurance is more expensive because it covers all routine mammograms. For some people, that extra coverage makes their health insurance too expensive to afford. Do you want that kind of coverage mandated for everyone with health insurance if it means that some people will not be able to afford health insurance? Would you prefer that more people have basic health insurance or that fewer people have comprehensive health insurance?

I'm not sure yet whether or not I support this bill. On the whole, I'd prefer that the Federal government stick its fingers into as few pies as possible. I think regulation is best done by the states, not by Washington. On the other hand, this may be one of the few Senate bills that is actually permitted under the Constitution's Interstate Commerce Clause.

Madison's liberals spend a lot of time talking about helping the poor and improving the lives of the poor. This is, bluntly, a load of hogwash.

The Capital Times published another article about Wisconsin Health Care for All and their plan to offer health care to everyone in the city of Madison. In this article, I learned that most of the group's members are former Kerry campaign members. They were, understandably, depressed after Senator Kerry's loss in the 2004 election:

"We decided that we wanted to keep working," said Barbara Spar, who teaches human resources management at Madison Area Technical College. "We wanted to be for something. We wanted to use our energy instead of being depressed."

They decided to use their energy to implement universal health care on a local level -- Madison, specifically. As I wrote previously, the group wants to implement their plan by requiring all businesses in Madison to pay a portion of their payroll into an insurance fund. Businesses that already provide healthcare will be exempt from this new "fee".

The group boasts that they have an economist as one of their leaders: John Kalfayan. Therefore, group members are certain that their plan will not hurt businesses in Madison or lead to layoffs. Quite possibly they're right. If they are able to implement their plan, I have every confidence that no existing businesses will close. Furthermore, I'm fairly confident that no one will be laid off as a result of this plan.

That's not to say that this plan will good for everyone. This is one small group of people that would be hurt by this plan: those who have few marketable job skills. As an economist, I would expect that Mr. Kalfayan is familiar with the idea of "marginal utility". Simply put, marginal utility is the value that someone gets from the last unit of something. Think of it this way: for a hungry man, a single burger has great value. A second burger would be appreciated, but a little bit less than the first burger was. A third burger would be okay, but he might not miss it if it wasn't there. A fourth burger might even be ignored. The fourth burger then has a much lower marginal utility than the first burger did.

The same principle holds true in business. As businesses hire more employees, each employee will have a lower marginal utility to the business. If it is too expensive to hire an additional employee (for instance, if the employer must provide healthcare in addition to minimum wage), the business may choose to make do with the employees they already have. Thus, while this healthcare plan may not cause any layoffs it will, quite possibly, prevent new jobs from being created.

There is another factor that will come into play. As employees become more expensive, businesses will choose to hire only the best employees. If this new "healthcare fee" causes the minimum wage to rise from $5.50 an hour to $5.94 an hour, the employer will only hire employees who can contribute more than $5.94 an hour to the bottom line. This means employers will only hire someone who is fully trained and competent.

What about less qualified applicants? What about people who might have had trouble holding down a job in the past or who have limited work experience or who simply require a lot of on the job training? The answer is simple: it will be much harder for them to find work. They will be passed over in favor of applicants who can justify the higher pay scale.

Implementing this healthcare plan would remove the lowest rung from the economic ladder. Implementing this healthcare plan would lead to businesses squeezing out applicants who are inexperienced or under-qualified. For these people, Wisconsin Health Care for All is not offering a choice of a job without healthcare benefits or a job with healthcare benefits. No, for these people, Wisconsin Health Care for All only offers the choice of a job with healthcare or no job at all. Which do you think a desperate man would prefer: a job without healthcare or no job whatsoever?

I know which option I would prefer. The simple fact of the matter is, this plan would neither help the poor nor make them better off. It is a purely cosmetic fix that will have large, hidden repercussions. While Madison's liberals will pat themselves on the back for the workers they've helped, they'll be completely oblivious to the people they've hurt.

I'd rather focus on why Madison's businesses can't voluntarily offer health insurance. I have a sneaking suspicion that it might have something to do with the fact that only four states in the nation have higher taxes than Wisconsin. Unfortunately, that problem will only be made worse by taking a new payroll "fee" from local businesses.

Employer provided healthcare is obviously a good thing. It's so obvious that a local, Madison grass roots group is pushing the city to mandate health insurance for all local employers:

A grass-roots group of Madison-area residents wants the city to require employers to provide health insurance through a mandated fee. The group, Wisconsin Health Care for All, has proposed a universal health insurance plan called "Provide or Pay." It would force employers to make insurance available to all workers or contribute roughly 5 percent to 10 percent of payroll into a community health plan.

Thankfully, the name of this plan is perfectly descriptive. It is a threat to all local businesses: follow our demands or else. While their aim may be laudable, providing healthcare for employees of Madison-based businesses, their methods are deplorable. Their plan will immediately increase the expenses of local businesses by 5 to 10 percent. Increased expenses have to be met somehow. Local business will be forced to increase prices by an equivalent amount or will be forced to lay off employees. Neither outcome will be beneficial for the poor in Madison.

But backers of the insurance proposal call it pro-business, saying it would give companies an affordable way to provide insurance for all workers. "We're trying to create a standard that would make Madison a mecca for business," said Ann Fleischli, a leader of the group.

I'm thankful that we have these enlightened leaders to provide solid advice to Madison's businesses. While most business owners are struggling to balance revenue and expenses, these citizens have discovered the perfect way to provide affordable health insurance. Fortunately, they are willing to share their expertise for free. Who knew? It turns out that increasing expenses by 5-10 percent is not only a good business idea, but is also all that's needed to turn Madison into a mecca for business. And here I always thought that lower taxes was the only ingredient needed to make any area a mecca for business.

"The city doesn't have the authority to impose a payroll tax," [Michael May, Madison city attorney] said.

Fleischli, also an attorney, maintains that municipal law would allow the plan. "It isn't a payroll tax," she said. "It's a fee that's indexed to the payroll."

How's that again? Isn't that what an income tax essentially is: a fee indexed to one's income? I really think this is the most incredible statement in the entire article. Fee? Tax? What's the difference? If the government requires payment and the payment is indexed to some other variable, I'd say that's a tax -- no matter what name the government may choose to put on it. Wisconsin Health Care for All is proposing a new city-mandated payroll tax. It is anti-business, illegal, and potentially damaging to the city's economy.

Bright ideas like these are why Madison is described as "70 square miles, surrounded by reality". It would be nice if we could find some way to inject "Wisconsin Health Care for All" with a concentrated dose of reality. Until then, I'll oppose this plan unequivocally.

The problem with easy solutions is that they never are. Healthcare is a problem that has no easy solutions, despite what many politicians on both sides of the aisle will tell you. Take a look at The Fix-It Myth:

Here's the paradox: A health care system that satisfies most of us as individuals may hurt us as a society. Let me offer myself as an example. All my doctors are in small practices. I like it that way. It seems to make for closer personal connections. But I'm always stunned by how many people they employ for nonmedical chores -- appointments, recordkeeping, insurance collections. A bigger practice, though more impersonal, might be more efficient. Because insurance covers most of my medical bills, though, I don't have any stake in switching.

On a grander scale, that's our predicament. Americans generally want their health care system to do three things: (1) provide needed care to all people, regardless of income; (2) maintain our freedom to pick doctors and their freedom to recommend the best care for us; and (3) control costs. The trouble is that these laudable goals aren't compatible. We can have any two of them, but not all three. Everyone can get care with complete choice -- but costs will explode, because patients and doctors have no reason to control them. We can control costs but only by denying care or limiting choices.